Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — FY2018 Earnings Presentation
16 slides from Bread Financial's earnings presentation, Feb 7, 2019
Slide 1: Alliance Data Full Year 2018 Results
Alliance Data NYSE: ADS Full Year 2018 ResultsFebruary 7, 2019 Exhibit 99.2
Slide 2: Forward-Looking Statements
11 2 Forward-Looking StatementsThis presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generall
Slide 3: Agenda
Agenda Speakers: Ed Heffernan President and CEO Charles Horn EVP and CFO Consolidated ResultsSegment Results2019 Outlook2019 Guidance 1 3
Slide 4: 2018 Consolidated Results
2018 Consolidated Results(MM, except per share) 2 4 Year Ended December 31, 2018 2017 % Change Revenue $7,791 $7,719 +1% Pro forma revenue1 $8,075 $7,719 +5% Net income $963 $789 +22% EPS $17.49 $14.10 +24% Core EPS $22.72 $19.35 +17% Adjusted EBITDA $2,466 $2,218 +11% Adjusted EBITDA, net $2,080 $1
Slide 5: 2018 Segment Results
Year Ended December 31, 2018 2017 % Change Revenue: LoyaltyOne® $1,068 $1,304 ASC 606 adjustment 284 -- Change to net revenue presentation Pro forma 1,352 1,304 +4% Epsilon® 2,175 2,272 -4% Card Services 4,598 4,171 +10% Other (50) (28) $8,075 $7,719 +5% Adjusted EBITDA, net: LoyaltyOne $254 $257 -1
Slide 6: 2018 Full Year Non-Card Segments
6 2018 Full Year 6 Non-Card SegmentsEpsilon:$2.2 billion in revenue, $475 million in adjusted EBITDAMix of growing, stable and declining productsAgency and site-based display offerings are in declineShift in product mix driving margin improvementLoyaltyOne:$1.4 billion in pro forma revenue, $254 mil
Slide 7: 2018 Full Year Card Services Segment
2018 Full Year 7 Card Services SegmentRevenue of $4.6 billion and adjusted EBITDA, net of $1.5 billionDouble-digit revenue and adjusted EBITDA, net growthRecord number of new client signings (2x historical)All in growth verticals where we have proven track record of winning (home décor, children’s,
Slide 8: 2018 Full Year – Credit Metrics
Year Ended December 31, 2018 2017 Change Credit sales $30,702 $31,002 -1% Average card receivables $17,412 $16,186 +8% Normalized average card receivables 1 $18,729 $16,775 +12% Total gross yield (revenue/normalized average card receivables) 24.5% 24.9% -0.3% Operating expenses as % of normalized av
Slide 9: Card Services: Average Receivables Growth
Card Services: Average Receivables Growth 9 Reported growth of +8%Includes impact of discontinued programsActive client growth of +23% +23% Active Clients: + Discontinued programs: = Reported: $16.2bn $17.4bn +8% $15.6bn $3.6bn $1.8bn ~30% from newer signings (2015-2018); ~200% growth
Slide 10: Card Services: End of Year Receivables
Card Services: End of Year Receivables Billion $17.9 $2.1removed 7 year CAGR of 18% Long-term growth of 18 percent compared to 3 percent industry revolving debt growth even with the discontinued programs in 2018Consistent ROE’s > than 30 percent or 2-3x industry 10
Slide 11: Card Services: Principal Loss Rates
6 11 Card Services: Principal Loss Rates 2005 - 2007~ 6% At Trend Below Trend 2016~ 5% 2017 ‐ 2018~ 6% At Trend Loss rates have now returned to trend
Slide 12: 2019 Outlook
Non-Card Segments:Status-quo: mid single-digit growth in revenue and adjusted EBITDACard Services:Exit 2019 at $20.5 billion in card receivables compared to $17.9 billion at 2018 year-end, or 15 percent growthNew vintages (clients signings from 2015-2019) to account for over 40 percent of receivable
Slide 13: 2019 Outlook: Epsilon Divestiture
13 2019 Outlook Epsilon Divestiture:2018: Strategic reviewHire investment bankers and lawyersMove to formal process2019:Initial bids receivedCurrently finishing selection of final biddersProcess moving smoothly; if consummated, use of proceeds focused on further debt reduction and share repurchases
Slide 14: 2019 Guidance
2019 Guidance 14 Initial Annual Guidance: $8.1 billion in revenue; $22.00 in core EPSStrong growth expected in ending card receivables creates substantial provision buildCard receivables growth is considerably weighted towards back-half of yearFirst Quarter: Revenue down mid single-digits; core EPS
Slide 15: Financial Measures
12 15 Financial MeasuresIn addition to the results presented in accordance with generally accepted accounting principles, or GAAP, the Company may present financial measures that are non-GAAP measures, such as constant currency financial measures, adjusted EBITDA, adjusted EBITDA margin, adjusted EB
Slide 16: Q&A
Q&A 16